San Miguel: A prized political jewel

MANILA, Philippines – In January 1984, talks were rife in Manila’s business circles that the controlling shares of San Miguel Corporation (SMC), the country’s top food company then, as it is now, had changed hands.

Businessman Danding Cojuangco speaks at the Philippine Stock Exchange (PSE) on the day San Miguel Brewery, which was earlier spun off from SMC, became a publicly listed company

These talks came about after months of negotiations between the group of Andres Soriano Jr., on one hand, and the group of Eduardo “Danding” Cojuangco, Jr., on the other. The Soriano group at that time owned 41 percent of SMC while the group of Danding had a prior agreement with businessman Enrique Zobel to buy out the latter’s 16-percent interest in the company. The Danding group wanted to wrest control of SMC management and had offered to buy the shares owned by the Soriano group.

The negotiation was shrouded in utmost secrecy.

The buyers’ identity and the sources of funds for the purchase were lost in a maze of corporate structures that facilitated the transfer of the stocks, as well as the funds, from one entity to another. In fact, when the media uncovered the buyout a few months after it was consummated on December 15, 1983, Danding Cojuangco tried hard to hide from the public the key institutions involved in the sale.

He was quoted in newspapers then as saying that, “no money from the UCPB, Unicom, United Coconut Planters Life Assurance or any corporation in which the coconut farmers have a share was used in the (SMC) transaction.”

It was only after the dictator was ousted in 1986 that the details of the SMC transaction were fully unveiled. Documents recovered from Malacanang and the United Coconut Planters Bank (UCPB) indicated that Marcos himself was very much involved in the transaction. In fact, he was said to be “the real man” behind the buyout.

The documents also revealed that the money to buy both the Soriano and the Zobel shares totaling more than P2 billion all came from UCPB.

Zobel’s shares were bought at P22 per share—the prevailing market price then— or a total of P374 million for the whole bloc of shares. The Soriano group agreed only to sell 33.1 million of their shares at P50 per share—more than double the prevailing market price then—for a total of P1.656 billion. The bloc made up about 31 percent of the total.

The remaining 10 million-plus shares, comprising 10 percent of the 105.6 million shares issued and outstanding at the time, were retained by the Soriano family. Thus, together with the 16 percent share bought from Zobel, Danding Cojuangco’s group controlled 47 percent of San Miguel. (Read excerpts from Boss Danding here)

The documents further revealed that part of the deal was for SMC to invest P500 million in UCPB preferred shares and P1.15 billion in time deposits and other placements, or a total of P1.650 billion. This money was in turn loaned by UCPB to 14 CIIF holding companies to acquire the 31 percent bloc from the Soriano group. The 14 CIIF holding companies were created solely for the purpose of acquiring the said SMC shares.

This kind of transaction may be called in Filipino “ginisa sa sariling mantica ” but this funding arrangement had prevented the depletion of the coconut levy funds, which comprised the bulk of UCPB deposits then. Only the P374 million needed to acquire Zobel’s 16 percent was taken directly from the UCPB. And this amount, Danding Cojuangco insisted (with the Supreme Court sustaining him in their recent decision was what he took out as a personal loan from UCPB.

Farmers’ plea

Coconut farmers, who are claiming ownership of these shares, have asked the High Tribunal to reconsider its decision favoring Mr. Cojuangco.

First Gentleman Mike Arroyo, President Gloria Macapagal-Arroyo and businessman Danding Cojuangco at the Philippine Stock Exchange (PSE) on the day San Miguel Brewery, which was earlier spun off from SMC, got publicly listed

According to them, government documents show that the loan of P1.650 billion that the 14 CIIF holding companies took out from UCPB and the P374 million that Danding Cojuangco used in buying Zobel’s 16-percent share in San Miguel, which total P2.024 billion, was being amortized as a single loan. It was paid, they said, from the annual incomes of UCPB (estimated at P130 million), Unicom (P50 million), the CIIF mills (P20 million), and the expected dividends of the 47-percent share in San Miguel estimated at P100 million for 1983 and P150 million in 1984.

Will the SC reconsider its controversial verdict?

Outside the justices’ chambers, however, is persistent talk that San Miguel has once again come full circle, that the corporation’s controlling shares will soon again change hands. And like the buyout negotiation 28 years ago, this too is shrouded in utmost secrecy.

The buyers’ identity, the “real man” behind the negotiation, and the source of funds for the purchase of the shares, are carefully hidden from the public. While he is neither an heir to Marcos or related to him, this supposed real owner shares the late dictator’s love of power and money. – Newsbreak

(Earl Parreño is the author of the book Boss Danding, published in 2003 and which chronicles the rise to power of businessman Eduardo “Danding.”)